A Cornell University paper has discovered that decentralized exchanges (DEX) are beset by bot trading, dubbed Flash Boys. The markets, freely available to anyone, are still seeing fake activity or concerted bot orders, in effect skewing the market and achieving pumps.

The research comes on the tails of previous insights into what looks like bloated, faked, or bot-generated orders on centralized exchanges. Activity on those exchanges outpaced the actual accounts, suggesting some of the orders are not organic.

DEX market operators promised to solve the problems of centralized exchanges by offering transparency and not taking custodial control of trader funds. However, those markets are just as prone to bot activity.

The paper shows that the exploit of priority ordering affects DEX built on the Ethereum network. Because Ethereum uses gas to transact, bots first bid up the price of gas for placing orders, then pay to outpace regular users. Depending on the DEX, some exchanges do not have a centralized layer for order matching, and the trading happens based on the advantage of those that paid the highest gas fees.

DEXs also exist on the EOS network, as well as TRON and Stellar, but the research was focused on Ethereum exploits related to mining, not to block discovery through delegates. Some of the DEXs scrutinized even lacked an order matching mechanism, instead being powered by smart contracts. The gas economy of Ethereum has enabled the bot competition, the researchers concluded.

“We have also formally modeled the behavior of bots competing against each other for miner-supplied transaction priority in priority gas auctions. Our empirical study validates several key predictions of our model, including the convergence of bots on a form of profitable cooperation involving minimal gas-price increases. We also show that in many concrete cases, bots’ revenue from pure revenue arbitrage alone far exceeds the Ethereum block reward and transaction fees,” the report concluded.

Ethereum gas usage has shown anomalies in the past, with regular spikes. Other exploits have been noticed, including miners paying themselves very high block reward fees, thus potentially laundering funds and hiding their origin.

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